Miscellaneous Investment Products Flashcards
When were ISAs introduced
1999
What age is a normal ISA available to?
Over 16
What age is a stocks and shares ISA available?
18
What investment can’t an ISA hold
Unquoted shares
When someone dies, what can their spouse do regarding ISAs
They can make an additional subscription to an ISA on top of their £20000 limit.
What forms of stocks and shares ISAs are there?
Unit trust and OEIC
Investment trust
Self-select
Managed - offered by stock brokers
Corporate - wrapper around a companies shares
Derivative - offered through off shore structures
What charges might occur with ISAs
Usually 5% intial charge and annual of 1-1.5%
Potential commision
Other charges such as an annual report
What is an innovative finance (IF) ISA?
ISA that allows investment in peer to peer lending and crowdlending.
Introduced in 2016
What are the rules with IF ISAs
Minimum age 18
Better return/higher risk. No middle man and loans with less scrutiny.
Peer to peer lending is not covered by FSCS
No equity partition.
What are the rules for help to buy ISAs?
Available over 16
First time buyer
£1200 lump sum start up £200 a month
25% bonus up to maximum of £3000 (£12000 saved)
House price maximum £450000 in London £250000 outside.
No new ones can be set up.
What are the rules for LISA
Ages 18-40 to open
Save up to 50 years old
Can be taken as cash over 60
What are the rules on junior ISAs (JISAs)
£9000pa
Under 18 uk residents or Crown servant
No allowed child trust fund, but legacy one can be transfered
16 yes old manages the money can be taken at 18.
Describe child trust funds (CTF)
Legacy scheme started in 2002 and stopped 31/07/2010.
Initially £250 given by the government was lowered to £50 until it was replaced by JISA
£9000 pa
Can be taken at 18.
What are the rules for stakeholder cash ISAs
No charges
Minimum deposit of no more than £10
Unlimited withdrawals
Interest of no less than 1% bellow the BOE base rate.
What are the rules for stakeholder stocks and shares ISAs
Maximum annual charge of 1.5% for the first 10 years 1% after
Minimum subscription of no higher than £20
No more than 60% invested in riskier assets (shares and property)
Smoothing to be applied where a ‘with profits’ fund applied.
What position does a buyer/seller of a future hold?
Buyer - long
Seller - short
How does a future agreement work?
An initial margin is held by a middle man by both sides
The price is monitored, and a variation margin is paid.
This pays out when closed.
Failure to pay variation closes contract and by buying a reverse contract and charging this to the client.
What is a call option?
The option to buy at a certain time or price.
What is a put option?
The option to sell at a certain time or price
What is an option to based on time called?
European-style
What is an option based on price called
American-style
What are the terms for what an option is worth?
In profit or in the money- in profit
Under- out of money
Equal- at the money
How can derivatives be used in a portfolio?
To hedge for future purchase
To hedge a portfolio
To achieve different asset allocation in the short term without having to physically sell
Speculating
How does tax work for derivatives
CGT for most people unless classed as traders, then this is classed as income.
No CGT for individual traders on gilts or qualifying corporate bonds
Discribe hedge funds.
Specialist investments where a fund manager uses techniques such as derivatives and buying stocks which they believe to be undervalued with the objective of achieving an absolute return.
It is unlikely to be restrained by a benchmark. Looks to make absolute return with low volatility.
Can gear.
Often, it has no correlation with the market.
How do most people access hedge funds?
Through funds made up of a number of hedge funds.
Where do hedge funds normally operate out of?
Territories such as the cayman Islands or Bermuda.
How much is the usual minimum investment in a hedge fund.
1m or tend to have high charges.
What are the tactics used by hege funds?
Long/short funds
Absolute return
Relative value
Event-driven
Tactical trading
How does long/short funds work?
Combines long short buying selling
How does absolute return work?
Uses longs/shorts to achieve a positive position no matter the market condition
Describe relative value strategy
Identifying and exploiting price anomalies between a combination of investments
Discribe event driven strategy
Involves using price movements from anticipated corporate events to achieve high returns
Describe tactical trading strategy
Invests across a wide range of asset classes and adopts sub strategies such as short/long selling.
What are absolute return funds?
Funds that attempt to achieve positive returns in all market conditions
What is a structured product?
Uses zero-coupon bonds combined with options to achieve capital protection.
What are structured products that offer no protection called?
Structured Capital at Risk Products (SCARPs)
